Assignment on

Organizational
Buying
Behaviour
Prepared by:
Jagannath Padhy Roll No. 26
Pravin Dsouza Roll No. 11
Class: MMM, Sem-IV
Summary of the Assignment:

Introduction to Organizational Buying Behaviour

Compare the characteristics of Organizational with consumer buyer behaviour.

Evaluate the different types of buying situations that organizations face.

Explain organisational decision making processes.

Consider the influences that impact on organisational buyer behaviour.

Introduction to Organizational Buying Behaviour

Organization buying is the decision-making process by which formal organizations establish the need for
purchased products and services and identify, evaluate, and choose among alternative brands and
suppliers.

Organisational buying is very similar to individual buyer behaviour with some contextual differences.
Organisations buy in furtherance of organisational objectives, such as to manufacture and deliver goods
and services to members, customers or the community.
Organisational buying is heavily influenced by derived demand, that is, demand for an end product or for
a product or service sold by the buyers customers. The demand for components by a manufacturer will
be dependent on demand coming from their customers, the retailers and wholesalers, who in turn are
reacting to demand from their customers, the consumers. Overall consumer demand may in turn be
impacted by economic, social, political and technological factors in the environment.
Different groups or individuals may play one or more of the following roles:

Users: these are the people who will directly use or consume or require the product or service in
order to undertake their operational duties.

Influencers: these are individuals or groups who help specify the requirements or provide
information to help evaluate the alternatives. People who provide technical input are usually in this
group.

Buyers: these individuals and groups have the formal authority to select vendors and undertake the
actual purchase transaction. They may take a major role in the negotiations on price and conditions
of supply.

Deciders: These individuals have formal or informal authority to select the final supplier. May be the
same as Buyers in routine purchases.

Gatekeepers: These individuals informally or formally control the flow of information or access to
other groups involved in the buying process.

The differences between organizational and individual buying processes are shown in the following table:
Buying Step
Problem
recognition
General need
description
Product
specification
Information/
Supplier search
Proposal
solicitation
Buying Step

Business to Business
Anticipates and plans for purchase on
a routine basis
Extensive, objective cost-benefit
analysis
Precise technical description using
techniques such as value analysis
Extensive search that extends to the
search for supplier
Formal, such as in a tender process if
large volumes or values involved
Business to Business

Supplier
selection

Made after extensive evaluation of

objective information

Order-routine
specification
Post-purchase
performance
review

Routine calculation of re-order points

as well as time and place of delivery
Extensive comparison made and
feedback given, concern with quality
management at source

Consumer
Reacts to needs when they arise
Limited analysis of benefits; concern
with total cost
Description more in terms of benefits
Limited search geographically and in
terms of sources
May be verbal
Consumer
Limited analysis with subjective and
anecdotal information influencing the
decision
Not routine
Little basis for compari

Three Buying Situations:

1. New task
2. Modified rebuy
3. Straight rebuy
New task
In this situation, the buyer is buying the product for the first time. As the cost of the product or
consumption value becomes higher, more number of executives are involved in the process. The stages
of awareness, interest, evaluation, trial, and adoption will be there for the products of each potential
supplier. Only the products which pass all the stages will be on the approved list and price competition
will follow subsequently.
When the problem or need is totally different from previous experiences.
Significant amount of information is required.
Buyers operate in the extensive problem solving stage.
Buyers lack well defined criteria.
Lack strong predispositions toward a solution.
Modified rebuy

In this buying situation, there is a modification to the specifications of the product or specifications related
to delivery. Executives apart from the purchasing department are involved in the buying decisions. The
company is looking for additional suppliers or is ready to modify the approved vendors list based on the
technical capabilities and delivery capabilities.
Decision makers feel there are benefits to be derived by reevaluating alternatives.
Most likely to occur when displeased with the performance of current supplier.
Buyers operate in the limited problem solving stage.
Buyers have well defined criteria.
Straight rebuy
In this buying situation, only purchasing department is involved. Thet get an information from inventory
control department or section to reorder the material or item and they seek quotations from vendors in an
approved list. The "in-suppliers" make efforts to maintain product and service quality. The "out-suppliers"
have to make efforts to get their name list in the approved vendors' list and for this purpose they have to
offer something new or find out any issues of dissatisfaction with current suppliers and promise to provide
better service.

The problem or need is a recurring or continuing situation.

Buyers have experience in the area in question.
Require little or no new information.
Buyers operate in the routine problem solving stage.

The Buygrid Framework for Organizational Buying Situations

Major Influences on Business Buyers

Environmental factors
Expected demand for the product that the buying organization is selling, expected shortages for the
item, expected changes in technology related to the item etc. are the environmental factors that will
have an effect.

Organizational factors
Changes in purchasing department organization like centralized purchasing, decentralized
purchasing and changes in purchasing practices like long-term contracts, relationship purchasing,
zero-based pricing, vendor-performance evaluation are the organization factors of importance to
marketers.

Interpersonal factors
These factors are the relationship between buyers and sales representatives of various competitor
companies.

Individual factors
These factors related to the buyer. What sort of ways of interacting and service are appreciated by
the buyers and what ways are considered as irritants? Marketers have to understand the reactions of
buyers.

Explain organizational decision making processes

Most of the information an industrial buyer receives is delivered through direct contacts
such as sales representatives or information packets. It is unlikely that an industrial
buyer would use information provided through a trade ad as the sole basis for making a
decision.
1. Problem recognition. The process begins when someone in the organization recognizes
a problem or need that can be met by acquiring a good or service. Problem
recognition can occur as a result of internal or external stimuli. External stimuli
can be a presentation by a salesperson, an ad, or information picked up at a trade
show.
2. General need description. Having recognized that a need exists, the buyers must
add further refinement to its description . Working with engineers, users, purchasing agents, and others,
the buyer identifies and prioritizes important product characteristics. Armed with exten~ive product
knowledge, this individual is capable of
addressing virtually all the product-relatGd concerns of a typical customer. To a
lesser extent, trade advertising provides valuable iaformation to smaller or isolated
customers. Noteworthy is the extensive use of direct marketing techniques
(for example, toll-free numbers and information cards) in cor.junction with many
trade ads. Finally, public relations plays a significant role through lle placement
of stories in various trade journals.
3. Product specification. Technical specifications come next. '!'his is usually the
responsibility of the engineering department. Engineers design several alternatives,
depending on the priority list established earher.
4. Supplier search. The buyer now tries [0 identify the most appropriate vendor. The
buyer can examine trade directories, perfonn a computer search, or phone other
companies for recommendations. Marketers can par:.icipate in this stage by contacting
possible opinion leaders and soliciting support or by contacting the buyer

directly. Personal selling plays a major role at this s~age .

5. Proposal solicitation. Qualified suppliers are next invited to submit proposals.
Some suppliers send only a catalog or a sales representative. Proposal developmen~
is a complex task that requires extensive research and skilled wtiting and
presentation. In extreme cases, such proposals are comparable to complete marketing
strategies found in the consumer sector.
6. Supplier selection. At this stage, the various proposals are screened and a choice
is made. A significant part of this selection is evaluating the vendor. One study
indicated that purchasing managers felt that the vendor was often more important
than the proposal. Purchasing managers listed the three most important characteristics
of the vendor as delivery capability, consistent quality, and fair price.
Another study found that the relative importance of different attributes varies with
the type of buying situations.
For example, for routine-order products, delivery, reliability, price, and supplier
reputation are highly importan~. These factors can serve as appeals in sales
presentations and in trade ads.
7. Order-routine specification. The buyer now writes the final order with the chosen
supplier, listing the technical specifications, the quantity needed, the warranty,
and so on.
8. Performance .review. In this final stage, the buyer reviews the supplier's performance.
This may be a very simple or a very complex process.